Giles Coghlan LLB, Lth, MA
HYCM
The market communicates its mood not only through price but also through volume. This is one message that you really need to pay attention to as volume is a confirmation or a contradiction of price, particularly at certain times.
The message of high volume
The best way to understand high volume is to think of high volume like SOMEONE IS SHOUTING. High volume is like using CAPS LOCK when you are typing. The simple relationship between price and volume is like this:
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Rising price, rising volume = Increasing demand (bullish).
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Rising price, falling volume = Decreasing demand (bearish).
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Falling price, rising volume = Increasing supply (bearish).
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Falling price, falling volume = Decreasing supply (bullish).
How to view volume?
There are many different ways to view volume on a chart, but one of the simplest ways is to just have volume displayed under the price. The interpretation of price is then complimented by volume. Is volume rising or falling with the price? Is this breakout supported with high volume? Remember, volume validates price and a big fundamental shift in the markets accompanied by high volume is a huge vote of confidence. So, if you have not been consulting volume when trading stocks you have been missing out on a key piece of analysis. If you look at the chart below you can see the volume plotted underneath the price.
There are other ways to have volume displayed like using volume profile (very useful) and equivolume charts, but if you have not looked at volume before the simplest way is to look at the example seen here and start with that.
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Editors’ Picks
EUR/USD drops toward 1.0650 ahead of German inflation data
EUR/USD is falling toward 1.0650 in European trading. Dismal China's Manufacturing PMI and pre-US debt deal vote anxiety support the safe-haven US Dollar while markets pare ECB rate hike bets after softer French inflation data. German inflation data, Fedspeak and US House vote eyed.
GBP/USD extends losses toward 1.2350 amid firmer US Dollar
GBP/USD is extending losses toward 1.2350 in the European session. Markets stay jittery amid China growth worries and ahead of the US House vote on the debt deal. Hawkish Fed's Mester underpins the ongoing US Dollar upsurge. More Fedspeak in focus.
USD/JPY remains depressed around mid-139.00s amid intervention warning
The USD/JPY pair extends the overnight retracement slide from the vicinity of the 141.00 mark, or a six-month high and remains under some follow-through selling on Wednesday. The pair maintains its offered tone through the early European session and currently trade around mid-139.00s, down over 0.20% for the day.
Editors’ Picks
EUR/USD drops toward 1.0650 ahead of German inflation data
EUR/USD is falling toward 1.0650 in European trading. Dismal China's Manufacturing PMI and pre-US debt deal vote anxiety support the safe-haven US Dollar while markets pare ECB rate hike bets after softer French inflation data. German inflation data, Fedspeak and US House vote eyed.
GBP/USD extends losses toward 1.2350 amid firmer US Dollar
GBP/USD is extending losses toward 1.2350 in the European session. Markets stay jittery amid China growth worries and ahead of the US House vote on the debt deal. Hawkish Fed's Mester underpins the ongoing US Dollar upsurge. More Fedspeak in focus.
Gold price rebound eyes $1,990 and US factors
Gold Price picks up bids to refresh intraday high as buyers cheer a two-day winning streak, after refreshing the lowest levels in 10 weeks. In doing so, the XAU/USD fails to justify the latest rebound in the DXY but aptly cheers the downbeat Treasury bond yields.
BTC bulls recovery plan targets $30,000 as bears exhaust
Bitcoin action slows down, allowing bears to doubt their strength. As more time elapses, the chances of bulls taking over control of BTC become more likely. A spillover effect would be noticeable in Ethereum and Ripple prices.
Risk off flow into month end
We had warned against the market wanting to get overly excited about the news of a US debt ceiling deal that was always going to get done. And now that this reality is coming to fruition, it’s back to focusing on the market drivers where investors need to focus.
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